Vodafone speeds up cost-cutting plan despite sales boost

Vodafone unveiled annual operating profits of £11.8billion today but warned it did not expect to better the figure in the current financial year.

The mobile phone giant said the 16.7 per cent improvement in adjusted operating profits for the year to March 31 reflected 'robust' trading in Africa and India, offsetting a weaker performance in its more mature European markets.

The Newbury-based company said economic uncertainty and the threat of rising unemployment in Europe meant it expected operating profits for the 2009/10 year to be in the range of £11billion and £11.8billion.

Vodafone said: 'In Europe and central Europe, recent significant declines in GDP and continued competitive intensity will make operating conditions challenging in the 2010 financial year.'

Revenues in Europe increased by 13.6 per cent, but stripping out favourable exchange rates the figure was down by 2.1 per cent on a year earlier. This reflected deteriorating trends in Spain and Greece, while in the UK service revenues fell by 1.1 per cent due to increased competition and challenging economic conditions.

A 15.3 per cent fall in underlying earnings in the UK was distorted by a £30million VAT refund in the previous year, but the company noted that the cost of retaining customers had increased as a higher proportion of its customer base received upgrades following the expiration of 18-month contracts.

Vodafone said write-downs on the value of its businesses in Spain and Turkey - £3.4billion and £2.25billion respectively - meant bottom-line profits for the group fell 53.5 per cent to £4.19billion in the financial year.

It added that its drive to cut costs by £1billion by 2011 was ahead of plan, with 65 per cent of the programme now due to be achieved in this financial year.

Vodafone said the benefits of the project were also seen in the 2009 year, with operating expenses in Europe remaining 'broadly flat'.

Shares in the group opened 1 per cent higher today, helped by the company's decision to increase its dividend payment to shareholders by 3.5 per cent to 7.77p a share.